NEW BEST DYNASTY SEAFOOD RESTAURANT LTD. v. EGERIA INVESTMENT LTD. AND OTHERS

HCA8200/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8200 OF 2000

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J U D G M E N T

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1. This action concerns the premises known as all that restaurant portion on level 1 (ground floor) of the commercial development of the podium of Flora Plaza erected on all that piece or parcel of ground registered in the North New Territories Land Registry as Fanling Sheung Shui Town Lot No.113 ("the premises"). By a lease dated 9 July 1996 made between the 1st defendants as landlords and the plaintiff as tenant ("the lease") the 1st defendants let and the plaintiff took up the tenancy of the premises for a term of five years from 1 April 1996 to 31 March 2001 with an option to renew for one further term of two years at market rent. The rent payable for the first three years, i.e. from 1 April 1996 to 31 March 1999, was $321,802.00 per month and for the last two years, i.e. from 1 April 1999 to 31 March 2001, was $418,342.00 per month.

2. The plaintiff operated a Chinese restaurant at the premises. At all material times the 1st defendants were and are the registered owners of the premises. The 2nd defendant was the agent of the 1st defendants at all material times.

3. The plaintiff's claim is in respect of breaches by the 1st defendants of their obligations under the lease. In the statement of claim the plaintiff also claimed damages for misrepresentation. The plaintiff alleged that it was induced to enter into the lease as a result of misrepresentation by the 1st defendants that there should only be one Cantonese style restaurant carrying on business in Flora Plaza, the building where the premises were. There was also a claim for damages for economic duress. However, Mr McLeish, counsel for the plaintiff, abandoned these claims as well as the claim for the return of a post-dated cheque. That being so, Mr Chain, counsel for the defendants, applied for judgment in favour of the 2nd defendant as there was no remaining claim against that defendant. I dismissed the claims against the 2nd defendant with costs on 5 June 2001. There was also an application for judgment on behalf of the 1st defendants on the counterclaim for vacant possession of the premises which application was not opposed by Mr McLeish. Accordingly, I also gave judgment for the 1st defendants on 5 June 2001 on the counterclaim for possession and made an order for vacant possession of the premises in favour of the 1st defendants with a stay of execution for 14 days. This was later varied by consent to a stay of execution for 16 days. The question of mesne profits was a matter to be determined.

4. The plaintiff's remaining claims against the 1st defendants were for damages for breach by the 1st defendants of their obligations under clause 4(b) of the lease and for an abatement of rent under clause 6 of the lease. The issues as agreed between the parties can be summarized as follows:-

(1) Whether clause 6 was engaged?

(2) If so, what was the period or periods during which it was engaged?

(3) If so, what was the amount of abatement of rent for the periods when it was engaged?

(4) Whether the 1st defendants were in breach of clause 4(b)?

(5) If so, whether the 1st defendants are protected by clause 7?

(6) If not, what is the quantum of damages recoverable in law by the plaintiff?

(7) Whether the plaintiff can rely on water leakage under both clauses 4(b) and 6?

(8) At what level should mesne profits payable by the plaintiff to the 1st defendants be fixed?

5. I heard evidence from Kwan Kam Wah ("Kwan"), a director and shareholder of the plaintiff at all material times, and from Tam Kwok Choi ("Tam"), a manager of the plaintiff at all material times. I also heard evidence from the plaintiff's expert Dr Eric C H Lim. I accept their evidence. The 1st defendants did not call any witnesses.

6. It is clear from the evidence of Kwan that the plaintiff wanted to operate a first class Chinese restaurant in Flora Plaza. It commenced business at the premises on or about 29 July 1996. This was a large Chinese restaurant with banqueting facilities and function rooms. The plaintiff spent over $13 million in the setting up costs of the restaurant with a great portion of it spent on decoration and furniture. There was erected a raised wooden floor inside the main hall in the area marked 'I' in the plan of the premises annexed to the expert report of Dr Lim at p. 300 of Bundle B ("the plan").

7. Kwan himself saw the water leakage problem at least 2 or 3 times in 1998 and 1999. He gave instructions to Tam, Yeung Tim and Tam Bor to deal with the leakage problems. It was clear from his evidence that it was his understanding that his staff made complaints to the management office at Flora Plaza. This was the management office dealing with the management of Flora Plaza. It was not the 2nd defendant or any of the 2nd defendant's companies. Tam, a manager of the plaintiff who was a manager of the restaurant at all material times, also confirmed in evidence that he and Yeung Tim both reported the water leakage problems in the restaurant to Kwan. Yeung Tim was his senior. In his supplemental witness statement Tam said that after the discovery of water leakage in late 1997 or early 1998, he informed Yeung Tim to make a complaint to the 1st defendants and/or 2nd defendant and he understood that Yeung Tim did make a complaint accordingly. He also said that water leakage problems reappeared from time to time since then about 3 times a year and on each occasion he asked Yeung Tim to make complaints to the 1st defendants or 2nd defendant. However, when he gave evidence it became abundantly clear that the complaints that were made by Yeung Tim were made to the management office at Flora Plaza and not to the 1st defendants or 2nd defendant.

8. On the evidence of Kwan and Tam, I accept that water leaked into the premises from the car park floor above the premises which caused damage to the premises. The walls and the false ceiling were stained at different parts of the restaurant as explained by Kwan and Tam. There was also damage to the carpet where the water dripped onto it. As a result of this, complaints were made from time to time to the management office at Flora Plaza. There is no evidence at all that any complaint was made to the 1st defendants or to the 2nd defendant until much later when the letter dated 14 August 2000 was sent by the solicitors for the plaintiff to the solicitors for the defendants.

9. It was also the evidence of Kwan and Tam, which I accept, that there were also problems with white ants or termites in the restaurant. These were found in the raised wooden floor inside the main hall of the restaurant in the area marked 'I' in the plan as well as in the V.I.P. room in the area marked 'D' in the plan. Those areas were also damaged by termites and repairs were carried out from time to time. Despite engaging a pest control company, they did not manage to get rid of termites from the premises. Tam confirmed that he and the other staff started to discover white ants or termites in the premises in about 1998. He confirmed that termites were found in the V.I.P. room in the area marked 'D' in the plan and the raised wooden floor in the area marked 'I' in the plan which was in the main hall. The false ceiling in the V.I.P. room was also damaged by white ants as it was made of wood.

10. The plaintiff did engage a pest control company to deal with the problem of termites but it failed to remove them. It was Tam's evidence that the person from the pest control company engaged by the plaintiff said that it was difficult to eliminate them as there were too many termites and the affected area was too large.

11. On the evidence I am satisfied that water leaked into the premises and caused damage thereat commencing from late 1997 or early 1998. I am also satisfied that the premises were infested with termites from about 1998. However, although complaints were made, these were not made to the 1st or 2nd defendants. These were made to the management office of Flora Plaza and not to the 1st defendants or 2nd defendant.

12. The plaintiff's claims against the 1st defendants are for damages under clause 4(b) and for abatement of rent under clause 6 of the lease. I shall deal first with clause 4(b).

13. Clause 4(b) provided as follows:

"To keep or cause to be kept the roof of the podium of the said building and the main structure, walls, drains, pipes and cables therein in a proper state of repair Provided that the Landlords shall not incur any liability under this Clause unless and until written notice of any defect or want of repair has been given by the Tenant to the Landlords and the Landlords shall have failed to take reasonable steps to repair or remedy the same after the lapse of a reasonable time from the date of service of such notice."

14. The plaintiff alleges that the 1st defendants have been in breach of clause 4(b) by failing to keep the main structure in proper repair. This relates to the water leakage through the concrete slab in the car park floor above the premises into the premises. I am prepared to accept that on the evidence the plaintiff has proved that the water leakage was due to the 1st defendant's failure to keep the main structure of the building in a proper state of repair. However, the meaning of clause 4(b) is clear. It is clearly stipulated that the landlord shall not incur any liability unless and until written notice of any defect or want of repair has been given by the tenant to the landlord and the landlord shall have failed to take reasonable steps to repair or remedy the same after the lapse of a reasonable time from the date of service of such notice. On the evidence the only written notice that was given was the one by the plaintiff's solicitors' letter dated 14 August 2000. That was only 1 day before the writ was issued and the plaintiff cannot possibly establish that before issuing its writ the 1st defendants failed to take reasonable steps to repair or remedy the defect or want of repair after lapse of a reasonable time from the service of this notice.

15. It is accepted by Mr McLeish that the said letter of 14 August 2000 was the first written notice of complaint but the plaintiff relies on the oral complaints given previously to the 1st defendants or 2nd defendant as pleaded in para 8 of the amended reply and defence to counterclaim. However, in my view, the evidence did not support the plaintiff's allegation that oral complaints were given to the 1st defendants or the 2nd defendant. It was abundantly clear on the evidence, and I so find, that complaints were only made to the management office at Flora Plaza and not to the 1st defendants or 2nd defendant.

16. The plaintiff relies on estoppel. It is important to see the plaintiff's pleaded case in para 8 of the amended reply and defence to counterclaim. This is pleaded as follows:

"In reply to paragraph 11 of the Defence, if the plaintiff had not given written notice of complaint to the defendants (which is not admitted), the plaintiff avers that the plaintiff had in many occasions complained the problems as pleaded paragraphs 9(i) to 9(iv) of the Statement of Claim therein, including but not limited to the following complaints:-

(a) In about late 1997 or early 1998, a Mr. Yeung Tim, the manager of the plaintiff informed the problems pleaded in paragraphs 9(i) to 9(iv) of the Statement of Claim therein to the 1st and/or 2nd defendants.

(b) In about December 1998, a Mr. Yeung Tim, the manager of the plaintiff informed a Mr. Lee of the 1st defendants or the 2nd defendant of the problems pleaded in paragraphs 9(i) to 9(iv) of the Statement of Claim therein.

(c) In about July 1999, the said Yeung Tim again complained the aforesaid problems to a Miss Wong of the 1st defendants or the 2nd defendant.

(d) Mr. Lee and Miss Wong of the 1st defendants or the 2nd defendant had all along given assurance to the plaintiff that the defendants would put right the problems. The 1st defendants and/or the 2nd defendant did carry out some repair works in response to the plaintiff's complaint, although the said repair works were not effective and the problems remained.

(e) The said Mr. Lee and Miss Wong never requested the plaintiff to give any written notice nor did they draw the plaintiff's attention to the requirement of such a written while responding to the plaintiff's complaints; in so doing, by their conduct they permitted and induced the plaintiff to believe that no written notice was required.

(f) For the matters pleaded above and the matters pleaded in paragraphs 16 and 17 of the Statement of Claim therein, the 1st defendants are estopped and precluded from relying on the requirement of written notice under Clauses 3(h), 4(b) and 9(f) of the Lease."

17. Those facts as pleaded have not been proved by the plaintiff. The basis of the plea of estoppel is set out in (e) above, namely, estoppel by conduct. It is alleged that Mr Lee and Miss Wong of the 1st defendants or 2nd defendant never requested the plaintiff to give any written notice nor did they draw the plaintiff's attention to the requirements of such a written notice while responding to the plaintiff's complaints and in so doing, by conduct permitted and induced the plaintiff to believe that no written notice was required.

18. The evidence simply did not support such a plea. There was no evidence that anyone from the 1st defendants or the 2nd defendant ever gave any assurance to the plaintiff as alleged. Mr Lee and Miss Wong were never even mentioned in evidence. The plaintiff has failed to establish the facts giving rise to the pleaded estoppel.

19. There was also no evidence that the plaintiff was ever induced to believe that no written notice was required nor can this be reasonably inferred from the evidence. It was Kwan's evidence that it was only in about March to April 2000 that the plaintiff thought of making a claim against the defendants and he left it to his lawyers to deal with it. On 14 August 2000 they wrote the first letter of complaint. So, it is clear that prior to March to April 2000 the plaintiff did not even consider its rights under the lease and it must have been the case that they never even considered the landlords' obligations under clause 4(b) or clause 6 of the lease. I fail to see how the plaintiff could have been induced by anyone to believe that no written notice was required under clause 4(b). The evidence simply did not support this. The case of W.J. Alan & Co. Ltd. v El Nasr Export & Import Co. [1972] 2 QB 189 is clearly distinguishable on the facts and provides no assistance to the plaintiff. In my judgment the plea of estoppel fails. That being so, it was necessary for the plaintiff to give an effective written notice to the 1st defendants under clause 4(b) before making the 1st defendants liable. This the plaintiff failed to do before bringing these proceedings and the plaintiff's claim for damages under clause 4(b) fails. Issue (4) is resolved in favour of the 1st defendants. Issues (5) and (6) do not arise.

20. The plaintiff's claim for abatement of rent is under clause 6. It is pleaded in para 12 of the statement of claim that the plaintiff paid rent from 1 January 1998 to 31 March 1999 at the monthly rent of $321,802.00 and from 1 April 1999 to 31 May 2000 at the monthly rent of $418,342.00 for the total sum of $10,683,818.00. Although the plaintiff claimed that it was entitled to have the entire sum repaid because rent should have been abated for those periods, Mr McLeish conceded that the plaintiff could not maintain that no rent at all was payable for those periods. It was the plaintiff's case that it was entitled to an abatement of a part of the rent that was proportionate to the damage caused by water leakage and by white ants or termites.

21. Clause 6 of the lease provided as follows:

"If the said premises or any part thereof shall be destroyed or so damaged by fire, water storm, wind, typhoon, defective construction, white-ants, earthquake, subsidence of the ground, Act of God, Force Majeure or other cause beyond the control of the Landlords and not attributable to the act or default of the Tenant as to be rendered unfit for use and occupation, the rent hereby agreed to be paid or a part thereof proportionate to the damage sustained shall cease to be payable until the said premises shall have been restored or reinstated ..............."

22. This clause does not deal with want of repair on the part of the landlords. This clause deals with the situation where the premises or a part thereof are destroyed or damaged by causes beyond the control of the landlords and not attributable to the fault of the tenant. In such situations if the premises are rendered unfit for use and occupation, the contractual rent or a part thereof proportionate to the damage sustained shall cease to be payable until the premises have been restored or reinstated.

23. On the construction of the lease the Court should consider the language used and the surrounding circumstances in which the lease was entered into together with commercial common sense. (Holding & Barnes PLC v Hill House Hammond Ltd [2000] L&T.R. 428 @ 432, 433)

24. On the construction of clause 6 I agree with Mr Chain and I find that it is necessary for the plaintiff to establish the following:-

(1) that the "said premises" or any part thereof was destroyed or damaged;

(2) by one of the causes mentioned therein. The plaintiff relies on "defective construction", "white ants" or "other cause";

(3) that such cause was beyond the control of the 1st defendants;

(4) that such cause was not attributable to the act or default of the plaintiff; and

(5) that the damage was such as to render the "said premises" or part thereof as unfit for use and occupation.

25. As regards the damage caused by water leakage, the plaintiff's case is that the water leaking into the premises from the car park floor was as a result of "defective construction" or "other cause" beyond the control of the 1st defendants. The plaintiff relied on the expert evidence of Dr Lim.

26. Dr Lim, the expert who visited the premises on 6 and 12 September 2000, gave evidence that he found water damage to the premises over various areas as set out in his report. The damage to those areas was mainly due to water leaking from the ceiling above the false ceiling. His evidence was that water probably had leaked from the floor above either from the car park area or from the air-conditioning plant on that floor. The plaintiff does not complain about water leakage from the air-conditioning plant above the restaurant but only from the car park area. It was only the water from the car park area that was the subject matter of complaint at the trial, not the water from the air-conditioning plant room or from condensation from the air-conditioning piping.

27. Dr Lim's opinion was that the premises had experienced extensive water leakage problem and that although some remedial work had been undertaken to solve some of the leaks, he was informed that there remained a number of areas where leakage persisted. The floor slab between the car park floor and the ceiling of the premises was a concrete slab. He said that without further tests, which he did not conduct, he was unable to come to a view about the condition of the concrete.

28. One of the photographs (Fig. 14) annexed to his report shows that a coating had been applied on the car park floor right above some of the water leakage areas in the restaurant. It was his view that possibly there was no further leakage since the application of the coating but he was unable to say when it was applied. Without further tests he was unable to come to a conclusion as to whether it was effective. He was also of the view that as he was told that water kept leaking from that area when it rained heavily, it was more likely that water was leaking from a rain water pipe rather than from the car park floor. He said that he would have liked to carry out further tests to ascertain why the leakage occurred and whether the repair work was effective to stop the leakage. He was unable to say whether the concrete slab had a waterproof membrane to protect it from leakage, but he said that where there was a car park with open space he would expect a waterproof layer to be put into the concrete slab between the upperside and underside of the slab.

29. His view was that there were cracks in the concrete slab which ran right through the slab and allowed water to leak into the premises. He also said that water could leak through the slab even assuming there was a waterproof layer in the slab if the joints were not properly laid and to remedy that it might be necessary to lay down a complete waterproof layer again, and there had to be a sufficient overlap at the joints. Even where there was a sufficient overlap at the joints and with a complete waterproof layer, he said the problem could still occur depending on the quality of the concrete, whether there was contraction of the concrete or whether there was a differential settlement of the building, that is, if the building did not settle evenly when constructed. Although he gave evidence as to a number of possibilities as to why the leakage occurred, it is plain to me that without carrying out further tests he was unable to say why the leakage occurred. In re-examination, Dr Lim said that he was confident with how the leakage occurred but he had no clue as to why. It seems to me that on his evidence the plaintiff has failed to establish that the damage to the premises was caused by "defective construction" of the building.

30. The plaintiff has, in my view, established that the premises were damaged by water leaking into the premises and I so find. However, on the evidence I am not satisfied that the plaintiff has established that this was caused by "defective construction" or "other cause" beyond the control of the 1st defendants. It is not entirely clear what is being relied on as being the "other cause". Mr McLeish submitted that the cause must have been a latent defect and/or defects caused by expansion and contraction of the concrete slab separating the car park floor and the ceiling of the premises. However, this the plaintiff must establish by evidence and in my judgment it has failed to do so.

31. Mr Chain also submitted that in any event even if the water leakage caused damage to the premises, the premises were not rendered unfit for use and occupation. He submitted that the plaintiff failed to establish this.

32. The evidence of Kwan, which I accept, was that several function rooms in the restaurant could not be used when it rained heavily as there were problems with water leakage. He elaborated by reference to the plan as to where those rooms were. He said that those rooms could only be used after repair work inside the restaurant was carried out. He did not elaborate as to when and for what period of time such rooms could not be used. There was no evidence that the whole restaurant had to be shut down although I accept that some of the rooms could not be used whilst repair work was going on. But there was no evidence as to when and for what period of time such rooms could not be used.

33. Mr McLeish submitted that the use and occupation to be considered was use and occupation as a first class restaurant. He pointed to various clauses in the lease where the plaintiff was obliged to fit the premises in a style appropriate to a first class commercial complex (clause 3(d)), and to furnish first class service to its patrons and customers (clause 3(nn)).

34. It was Mr Chain's submission that "the said premises" referred to in clause 6 must be construed by reference to what was let to the plaintiff. What was let was the "bare shell". By clause 18(c) of the offer to lease it was stated that the premises were to be handed over in a "bare shell" condition. Kwan confirmed that the premises were given to the plaintiff as a "bare shell", namely, just the concrete walls, a ceiling and a floor. The plaintiff was required to fit out and furnish the premises in order to run the restaurant. It was submitted that "the said premises" in clause 6 must be construed by reference to what was actually let, namely, "the bare shell".

35. In my judgment the Court should have regard to the commercial purpose for which the premises were let. They were for the purpose of running a restaurant there. Under the lease the plaintiff was obliged to use the premises only for the purpose of the business of a Cantonese food style restaurant. In my judgment it is that purpose that must be considered when considering whether the premises or part thereof were unfit for use and occupation. I am unable to accept Mr Chain's submission that in construing clause 6 the premises must be construed by reference to what was let, namely, "the bare shell". The Court should have regard to the commercial purpose of the lease which was for the operation of a Cantonese food style restaurant at the premises. I am satisfied that part of the premises were unfit for such use and occupation for periods when those parts were under repair because of water leakage. There was, however, no evidence as to how long such repair works took and for what periods of time those parts were rendered unfit for use and occupation.

36. As regards the plaintiff's complaint about the infestation of the premises by white ants or termites, it is important to bear in mind that in order to succeed in its claim under clause 6, the plaintiff has to establish all of the five matters set out above. Even assuming that the plaintiff can establish that the "said premises" or a part thereof were damaged by white ants or termites, there was no admissible evidence as to what the cause was. It was Kwan's understanding that the water leakage into the restaurant was what caused the infestation of termites. But he is not an expert and his opinion is not admissible evidence of what actually caused the premises to be infested with white ants or termites. In my judgment, unless the plaintiff can establish what the cause was it cannot be said that the cause was beyond the control of the 1st defendants. It was for the plaintiff to establish this. The plaintiff has in my judgment failed to establish that the cause was beyond the control of the 1st defendants.

37. Likewise, unless the plaintiff can establish what the cause was, the plaintiff cannot establish that the cause was not attributable to the act or default of the plaintiff. By clause 3(ii) of the lease, the plaintiff covenanted and agreed, inter alia, to take all such steps and precautions to the satisfaction of the 1st defendants to prevent the premises or any part thereof from being infested by, inter alia, termites. Thus it was the plaintiff's obligation to take all such steps to prevent infestation by termites. The evidence was that the plaintiff engaged a pest control company to rid the premises of termites. Tam's evidence was that the pest control company failed to remove the termites from the premises. It was his evidence that the person from the pest control company said that it was difficult to eliminate them as there were too many termites and the affected area was too large. On that evidence it seems to me that the pest control company engaged by the plaintiff could have prevented the premises from becoming infested by termites although it was a difficult task. As I have said, unless the plaintiff can establish what the cause was, how can it be said that the cause was not attributable to the act or default of the plaintiff? In my judgment the plaintiff has also failed to establish this.

38. Issue (1) is resolved in favour of the 1st defendants. Issues (2) and (3) do not arise.

39. In my judgment the plaintiff has failed to establish that it is entitled to claim damages against the 1st defendants under clause 4(b). It has also failed to establish that it is entitled to claim an abatement of rent and a refund of any part of the rent already paid under clause 6. These being the only remaining claims of the plaintiff against the 1st defendants, the plaintiff's claims against the 1st defendants are dismissed. I give judgment to the 1st defendants on the claim and dismiss the plaintiff's claims against the 1st defendants.

40. In addition to its judgment for possession of the premises the 1st defendants also counterclaimed for arrears of rent and mesne profits. I am satisfied that the plaintiff has not paid the arrears of rent and outgoings from 1 June 2000. The plaintiff has been in breach of its obligations under the lease and has repudiated the lease. By the service of the defence and counterclaim on the plaintiff's solicitors on or about 25 October 2000, the 1st defendants accepted the plaintiff's repudiation. Thus the 1st defendants are entitled to payment of arrears of rent and outgoings, namely, the outstanding rates, management fees and air-conditioning charges. Mr McLeish does not dispute that the rent of $418,342.00 per month, rates at $15,200.00 per month, management fees at $27,129.00 per month and air-conditioning charges of $13,604.00 per month are payable by the plaintiff to the 1st defendants from 1 June 2000 to 24 October 2000. These come to the total sum of $2,264,280.65 for that period.

41. The 1st defendants are also entitled to interest on the said sum at the contractual rate of interest of 0.05% per day on any overdue rent, air-conditioning charges and management fees (clause 5(b)). Mr McLeish does not dispute that the contractual rate of interest is payable up to 24 October 2000. The interest payable at the contractual rate on the amounts outstanding from 1 June 2000 to 24 October 2000 has been set out in the schedule handed up and this has not been disputed. The total outstanding interest up to 24 October 2000 comes to $394,386.00 and the 1st defendants are entitled to that sum as interest at the contractual rate.

42. The 1st defendants are also entitled to mesne profits from 25 October 2000 to the date when possession was delivered up. Although possession was actually delivered up to the 1st defendants on 23 June 2001, it was agreed that mesne profits should be payable only up to 21 June 2001.

43. Mr McLeish submitted that the level of mesne profits should be the ordinary letting value of the premises. He submitted that with the economic downturn in Hong Kong the 1st defendants should not expect to receive as mesne profits the contractual rent but something less. I disagree. The evidence shows that the plaintiff exercised its option to renew the lease for a further term of 2 years. This was exercised on 5 September 2000 by letter from the plaintiff's solicitors to the 1st defendants. As at that date the plaintiff well knew that the rent payable under the lease at that time was $418,342.00 per month. Yet it was prepared to exercise the option to renew. Under the lease the option to renew was for one further term of 2 years at market rent which should not be less than the current rent. The fact that the plaintiff was prepared to pay not less than $418,342.00 per month as the rent under the further term is, in my view, cogent evidence that the market value of the premises was not less than $418,342.00 per month. As is stated in para 258, Vol. 27(1) Halsbury's Laws of England, (4th ed. reissue):

"...In most cases the rent paid under any expired tenancy is strong evidence as to the open market value."

And in footnote 3 it is stated as follows:

"In the vast majority of cases in which mesne profits are claimed, they are awarded, if at all, at the rate of the previous rent; and, as a rule of practice, if not of law, it can be taken as being the case that the burden lies upon a party who argues for a different rate for mesne profits, whether higher or lower, to adduce evidence to rebut the inference arising from any reasonably recent rack rental transaction."

44. Mr Chain submitted that the mesne profits payable should also include a sum for the outstanding rates, management fees and air-conditioning charges which should be awarded as a global sum for the damages suffered by the 1st defendants for being out of possession of the premises. However, Mr McLeish submitted, correctly in my view, that there has been no evidence that the management fees and air-conditioning charges have been paid by the 1st defendants although he accepted that rates must have been paid.

45. I am satisfied that the 1st defendants are entitled to mesne profits for the monthly sum comprising of the sum of $418,342.00 and the rates of $15,200.00 per month amounting to a total monthly sum of $433,542.00. The 1st defendants are entitled to the said monthly sum from 25 October 2000 to 21 June 2001. In my judgment the 1st defendants are entitled to mesne profits in the total sum of $3,338,273.00 for the said period.

46. The 1st defendants are therefore entitled to be paid by the plaintiff the total sum of $5,996,939.65 being the total of the said sums of $2,264,280.65, $394,386.00 and $3,338,273.00.

47. From the said total sum of $5,996,939.65 there must also be deducted the rental deposit received by the 1st defendants as well as the net proceeds which they have received from the distraint action. The rental deposit received by the 1st defendants amounts to $965,406.00 and the net proceeds from the distraint action amounts to $202,247.60. These sums must be deducted from the said total sum and there will, therefore, be judgment for the 1st defendants in the sum of $4,829,286.05.

48. I also give judgment to the 1st defendants for interest on the monthly sum of mesne profits of $433,542.00 from 25 October 2000 to 21 June 2001 at 1% above prime rate. I will leave it to the solicitors for the parties to calculate and to agree the amount of interest for this period.

49. There will also be interest on the judgment sums from judgment until payment at judgment rate.

50. There is also a counterclaim by the 2nd defendant for the sum of $474,275.00 being the proceeds of a cheque drawn by the plaintiff to the 2nd defendant for payment of rent and outgoings due for June 2000 which cheque was dishonoured. As the 1st defendants have obtained judgment for all outstanding rent and outgoings from 1 June 2000 to 24 October 2000, which includes the rent and outgoings for the month of June 2000, the counterclaim of the 2nd defendant is dismissed.